Your super can recover from pandemic losses

There’s no doubt Australians’ superannuation suffered during the past two years of the pandemic.

Millions withdrew funds from their super in 2020, taking out up to $20,000 each. Many lost jobs and had fewer working hours throughout the pandemic, limiting super contributions. And perhaps most damaging of all, many switched investment options as markets became rocky, and unintentionally ended up losing more than if they didn’t switch.

In short, the COVID-19 pandemic of the past two years damaged every aspect of Australians’ financial wellbeing, as explained in the ANZ Roy Morgan Financial Wellbeing Indicator.

So, you may be happy to hear there’s ways to recover from the damage that COVID-19 wrought. Not all of these ways are going to be appropriate for everyone and will depend on the financial position you are in, but whether you can act now or in the future, it’s good to be aware of how you can strengthen your super.

“Even though 2021 was a year of exceptional investment performance, it hasn’t made up for the negative impact of the pandemic on some members’ superannuation,” says Matt Davey, head smartCoach at smartMonday.

He outlines three ways members can rebuild their super balances over time.

• 1. Divert some of your salary to super
  
  Many Australians pay a marginal tax rate of 32.5% on their income, but the money that goes into super is only taxed at 15%.
  
  So, consider diverting some of your salary before tax into your super (that’s in addition to what your employer must contribute). Even small amounts such as $20 a week would add up to a considerable amount over time due to compounding interest. You can organise this with your work’s payroll team.
  
  When you add to your super before-tax it is known as a ‘concessional contribution’. You can contribute up to $27,500 to your super this way which includes your employer’s super payments. If contributions are less than that then you may be able to add extra in following years, subject to certain conditions.
  
  “The more money you put into your super account the more returns it will earn over time and it can even be used to reduce your yearly tax bill,” says Davey.
  
  “By topping up your super, you not only reduce the tax you’re paying on that part of your salary but benefitting from compound returns over the long run. In the end you’ll get a lot more from an amount invested this way compared to if it was saved from your after-tax salary.”

• 2. Bring your super together
  
  If you have more than one super account, you’re paying more fees and possibly more insurance premiums than you need to, and could be missing out on the compound returns that a single, higher super balance would bring. All of that can amount to significant dollars over time.
  
  Also, having only one account makes your super easier to manage.
  
  “It’s so easy not to be one of those people with multiple accounts because as a smartMonday member we can help you find any lost super and roll it all into your smartMonday account. We can also transfer your existing insurance over,” says Davey. 

  • Find and consolidate your super

• 3. Personal contributions
  You can also go big, and lump-sum contribute from your after-tax money, known as non-concessional contributions. You can contribute up to $110,000 a year this way, in addition to any re-contributions you make from what you took out under the COVID release scheme.
  
  (The Australian Taxation Office has details on re-contribution of COVID-19 early release superannuation amounts.)
  
  In the case your partner’s finances were affected by COVID you may also be able to contribute to their superannuation. If spouse contributions can be made (and there are some criteria to meet) and a spouse is not working or is a low-income earner, you may be able to claim a tax offset.

Millions of Australians’ super suffered during the pandemic. But there’s ways to build back over time.

“Super is a long-term investment. It really is. It’s a lifelong journey of investing to have the money you need for your life after work (what we at smartMonday call your ‘weekend’),” says Davey.

“If you look at smartMonday’s investment performance over the past three to 10 years you’ll see that all the options we’ve offered have grown. And while how we performed in the past doesn’t mean we’ll perform that way in the future, we know that in the long term, sharemarket investments do tend to rise.”

“And there are other ways to boost your super, such as the low-income superannuation tax offset, downsizer contributions, rounding up lost super and reconsidering your investment options,” says Davey.

“This is where our smartCoaches can be a valuable resource for you. This is our in-house team, who, at no additional cost to you, can help get your super in better shape.”